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IN THE HIGH COURT OF JAMMU AND KASHMIR AND LADAKH AT JAMMU
Sindhu Sharma, J.
Beigh Construction Company Pvt. Ltd. & Anr. – Petitioners
Versus
Amritanshu Infrastructure & Management Pvt. Ltd. – Respondent
CRMC No. 322 of 2018
Decided On : 14-07-2022
Negotiable Instruments Act - Complaint under section 138 - 138, 139 - The court discussed the provisions of Section 138 and 139 of the Negotiable Instruments Act, highlighting the requirement of a legally enforceable debt or liability for the offence to be constituted. The court also referenced key legal principles established by the Supreme Court in various cases, emphasizing the presumption in favor of the holder of a cheque and the deterrent nature of Section 138 to prevent callous issuance of negotiable instruments without serious intention to honor the promise implicit in the issuance.
Fact of the Case:
The respondent filed a complaint against the petitioners under section 138 of the Negotiable Instruments Act, alleging the dishonor of a cheque issued by the petitioners' company. The petitioners challenged the complaint on various grounds, including the lack of service of mandatory notice and the absence of a legally enforceable debt or liability.
Finding of the Court:
The court found that the complaint was valid and the proceedings initiated by the trial court were justified. The court emphasized that the issue of whether the cheque was issued in discharge of any debt or liability should be determined during the trial.
Issues: The issues revolved around the validity of the complaint under section 138, the requirement of a legally enforceable debt or liability, and the use of the cheque as security.
Ratio Decidendi: The court held that the complaint was valid and the provisions of Section 138 and 139 of the Negotiable Instruments Act were applicable. The court emphasized that the determination of the veracity of the defenses raised by the petitioners should be addressed during the trial.
Final Decision: The petition was dismissed, and the court upheld the validity of the complaint and the proceedings initiated by the trial court.
JUDGMENT :
1. The petitioners have challenged the complaint filed against them by the respondent under section 138of the Negotiable Instruments Act, 1881 before the court of learned Munsiff, Judicial Magistrate 1st Class, Jammu and also order dated 31.08.2017 vide which Judicial Magistrate after taking the cognizance of the offence have issued process against the petitioners.
2. A complaint alleging the commission of offence under section 138 of the Negotiable Instruments Act (in short 'N.I. Act') was filed against the petitioners' company alleging that the petitioners' company had issued a cheque bearing No. 085839, dated 17.05.2017 for an amount of Rs. 50.00 lacs drawn on the Axis Bank, Jammu to the respondent in discharge of its liability. This cheque was returned by their Banker with the endorsement 'insufficient Funds' vide Memo dated 18.05.2017. The respondent, thereafter, served notice of demand upon the petitioners under the Act on 14.06.2017, demanding the payment towards the dishonored cheque to be made with in fifteen days from the date of the receipt of the notice, though the notice dated 14.06.2017 was served upon the petitioners who refused to accept the same.
3. In the complaint, it is alleged that the petitioner No. 2 approached the complainant and assured him that payment of the aforesaid amount would be made to them during the last week of July, 2017 and requested the respondent not to proceed with any further action on the basis of that notice. The respondent submits that on this assurance they did not proceed to file a complaint against the petitioners. As no payment towards the cheque was made to complainant, accordingly, the complainant again presented the cheque before its bank, J&K Bank, Govindsar Branch, Kathua. The same was dishonoured and returned vide memo dated 24.07.2017 with there mark “Customer has not issued the cheque”. The respondent after receiving cash memo again sent legal notice dated 11.08.2017 to the accused persons who again refused to accept the same. The petitioners, thereafter, failed to make payment within stipulated period, as such, the respondent filed the complaint within the statutory period from the date of cause of action.
4. The petitioners have assailed the order dated 31.08.2017 by which cognizance has been taken and proceedings initiated in the complaint on the ground that the learned trial Court has taken cognizance in highly defective complaint under section 138 of the Act. The complaint has been filed without service of the mandatory notice as prescribed under section 138 of the Act. The notice dated 10th August, 2019 was neither served nor received by the petitioners and the learned Magistrate without considering these facts has issued process against the petitioners. The complaint does not disclose any details of liability in discharge of which the cheque was issued, therefore, the cognizance has been wrongly taken. It is also submitted that the cheque in question, was not issued by the petitioners in discharge of any debt or liability as the cheque was obtained by the respondent only to encash the same using credentials of the respondent in obtaining a contract for T-74R but since these contracts were not allotted to them, therefore, no liability existed. The respondent had thus failed to substantiate any reason or justification with regard to legally enforceable debt or liability, therefore, cognizance has been taken in mechanical manner which is perverse and liable to be quashed.
5. It is also contended by the petitioners that the respondent had obtained a signed blank cheque from them which would only be encashed provided the petitioners by using credentials of the respondent succeeded in allotment of contract. The cheque was not issued in discharge of civil liability, therefore, the respondent could not present the same to Bank for payment. The respondent is thus using these proceedings under section 138 of the N.I. Act, only for harassing the petitioners.
6. The prov
The main legal point established in the judgment is the requirement of a legally enforceable debt or liability for the offence under section 138 of the Negotiable Instruments Act to be constituted.
The complainant must prove that the cheque was issued for a legally enforceable debt or other liability to establish an offense under Section 138 of the Negotiable Instrument Act.
The presumption of a cheque being issued in discharge of a legally enforceable debt under Section 139 N.I.A. and the significance of a security cheque in commercial transactions were central to the c....
The signed blank cheque carries a legal presumption of liability under the Negotiable Instruments Act, shifting the burden of proof to the accused to demonstrate non-liability.
The main legal point established in the judgment is the presumption of liability of the drawer of the cheques under Section 138 of the Negotiable Instruments Act, 1881, and the burden of proof on the....
The court established that once a cheque is issued and signed, a legal presumption exists regarding its use for a valid debt, shifting the burden of proof to the accused to deny its validity.
The court reaffirmed that the burden to rebut the presumption under Section 139 of the Negotiable Instruments Act lies with the accused, and a signed blank cheque can still be valid if issued towards....
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